Toymaker Hasbro reported earnings early Thursday. Meanwhile, the recent struggles of pop culture collectibles brand Funko continued with its Thursday afternoon results. BofA Securities upgraded Hasbro stock to a buy rating early Tuesday.
Hasbro earnings fell 57% to 49 cents per share on a 10% revenue decline to $1.21 billion.
Analysts expected Hasbro earnings to halve to 56 cents per share on a 17% drop in revenue to $1.11 billion.
Revenue from Magic: The Gathering tumbled 15% to $311 million for the quarter. The company's Wizards of The Coast segment revenue fell 11% to $376 million. Total gaming sales declined by 7% to $491.2 million. The company announced it reached a deal to sell its eOne film and TV business to Lionsgate for $500 million, including $375 million in cash.
For the year, Hasbro expects flat adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) compared to 2022 levels. The game giant forecasts a 3% to 6% revenue decline, driven by a 25% to 30% decline in its entertainment segment due to "Dungeons & Dragons: Honor Among Thieves" film impairments and the ongoing industry strike. Hasbro increased its Wizards of the Coast revenue guidance by high-single digits.
Wizards of the Coast makes Dungeons & Dragons and Magic: The Gathering.
Hasbro averaged a 15.3% drop in revenue the past three quarters while earnings averaged a 39.3% decline during that time.
Rival toymaker Mattel beat quarterly estimates last week even as Barbie, Fisher-Price and American Girl brand sales declined for the fourth consecutive quarter. Mattel expects a boost in Q3 thanks to the massive success of its "Barbie" movie, which smashed North American box office records with its $162 million opening weekend.
Hasbro's "Dungeons & Dragons: Honor Among Thieves" film that released on March 29 didn't have the same spark as "Barbie," but has nevertheless grossed $208.2 million worldwide. But Hasbro's real magic comes from its trading cards.
BofA Securities upgraded Hasbro stock to a buy rating from neutral early Tuesday prior to results. Analysts Jason Haas expects Hasbro will report an earnings beat thanks to strong demand for its "Lord of the Rings"-themed "Magic: The Gathering" trading cards released in late June. Magic sales hit $1.1 billion in 2022, representing 18% of Hasbro's total revenue.
Hasbro drew the ire of fans late last year for overproducing Magic trading cards, which was "destroying the long-term value of the brand," Haas wrote in a November research note. BofA hoisted its price target on Hasbro stock to $85 from $68 before earnings.
Hasbro Stock
HAS stock slid 2% Friday to erase its modest gains from Thursday.
Shares are up 1.7% for the week after a rebound from support at their 10-week moving average, trading at its highest levels since late January. Shares are up 4.5% so far this year.
Funko Earnings
Funko reported an adjusted loss of 43 cents per share late Thursday, falling from earnings of 26 cents per share last year. Net sales tumbled 24% to $240 million. Analysts expected Funko to report a loss of 41 cents per share on a 20% drop in revenue to $250 million.
Core collectibles sales dived 25.5% to $173.7 million. Sales for the lifestyle and accessory Loungefly Brand fell 28.5% to $50 million.
Funko made slight progress on its inventory glut. Total inventories fell to $187.3 million, down from $191.6 million in Q1 and $246.4 million in Q4.
For the third quarter, Funko forecasts an adjusted loss between 3 and 10 cents per share on $280 to $310 million in revenue. The guidance is well below FactSet earnings expectations of 31 cents per share on $338 million in revenue.
The company lowered its full-year sales outlook to range from $1.05 billion to $1.12 billion, compared to the previous guidance of $1.19 billion to $1.26 billion. The collectibles maker slashed its adjusted EBITDA outlook to range from $20 million to $30 million. It previously guided EBITDA between $65 million and $75 million. FactSet expects full-year sales of $1.2 billion and EBITDA of $65 million.
Funko Rut Continues
Funko announced major layoffs late Friday.
The maker of Funko Pop vinyl figures said it would trim 180 to 200 employees, reducing its workforce by about 13%. The company expects $2.4 million to $2.8 million in mostly cash payouts related to the layoffs in its third quarter costs.
Funko projected $20 million to $22 million in annualized savings from the job cuts.
On July 13, Funko executive Brian Mariotti agreed to take a six-month leave of absence and was removed from his role as CEO by the board of directors. The board appointed Michael Lunsford to serve as interim CEO while Funko searches for a full-time replacement. Mariotti and Lunsford will both remain as directors of the company.
For Q1 results, Funko reported a loss of 49 cents per share adjusted an 18% decline in sales to $251.9 million. Analysts had anticipated a loss of 92 cents per share on $235.6 million in revenue. Inventory levels fell 22.3% from Q4 but were up 18.6% from last year.
Funko announced plans to eliminate $30 million to $36 million of its inventory following its fourth-quarter earnings miss. Meanwhile, sales declines accelerated the last two quarters leading up to Thursday earnings.
FNKO Stock
Funko stock remains down 41.6% in 2023 and 71% lower over the past year, following its major Q3 earnings miss from November.
FNKO stock dropped nearly 14% Friday after earnings. Funko stock fell 9.8% Wednesday. Shares rallied 8.7% Monday following the late Friday layoff announcement.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
